By Joseph P. Leverich, CPA

The health care reform debate went on for so long that you may have given up on following the details. However on March 23, the details were finalized when the president signed into law the Patient Protection and Affordable Care Act (PPACA). Here is a look at some of PPACA's major business-related provisions and how the act may affect the construction industry.

Points to know

First things first, the new law doesn't require contractors to provide health care coverage. Beginning in 2014, however, it will impose tax penalties on certain employers that don't provide it.

Namely, employers with 50 or more "full-time-equivalent workers" (FTEs) that don't offer coverage and have at least one full-time employee who receives a health care premium tax credit (a new break under PPACA for certain individuals who buy coverage themselves) will be subject to an annual fee of $2,000 per FTE (not including the first 30 FTEs). An FTE is defined as an individual who works 30 or more hours weekly, excluding full-time seasonal employees who work less than 120 days a year. Clearly, this would affect larger construction companies more than smaller ones.

There is some immediate good news for smaller contractors, too. Beginning in 2010, eligible small businesses may qualify for tax credits for buying group health coverage.

For tax years 2010 to 2013, the maximum credit is 35%, provided the employer contributes at least 50% of the total premium or 50% of a benchmark premium. In 2014, a maximum credit of 50% will be available for two years for employers that buy coverage through a state exchange and contribute at least 50% of the total premium.

The rules governing what businesses qualify as "small" and whether a business is eligible for the maximum credit or a partial credit are complex. So check with your financial and benefits advisors for details.

Effect on the industry

Owners of construction businesses with fewer than 50 employees could conceivably drop their health insurance benefits, lowering their operational costs and perhaps enabling them to better compete with larger construction companies. But such a move appears dubious because eliminating health care benefits could estrange employees and even lead to mass defections. Plus, many construction bids are won based on expertise rather than costs.

Regarding the work opportunities PPACA may bring, those remain uncertain as well. If health care use grows as more people are covered, medical organizations may expand their facilities. But many of the newly covered may turn out to be relatively healthy young adults, which could curb demand for new projects.

Still, in an official statement released soon after PPACA's signing, the Associated General Contractors of America stated, "It seems likely that health care construction will rise initially." Keep an eye on this locally if your construction company is a good fit for such jobs.

An evolving situation

PPACA is a big law with many details. Be sure to revisit this topic regularly with your financial and benefits advisors to be sure you're up to speed on what's required of you and how you might turn health care reform to your advantage.

Sidenote: HIRE is still HERE

Signed just before the health care reform law, the Hiring Incentives to Restore Employment (HIRE) Act may have gotten lost in the shuffle. But at the center of the act are two valuable incentives for hiring and retaining workers:

1. P ayroll tax forgiveness. This provision essentially exempts qualified employers (including contractors) from having to pay the 6.2% Social Security portion of Federal Insurance Contributions Act (FICA) taxes through year end on certain new hires who were unemployed. Various limitations apply.

2. Tax credit for retention. The HIRE act offers a tax credit for retaining for 52 consecutive weeks workers who qualified for payroll tax forgiveness. The tax savings per worker are the lesser of 6.2% of the wages paid to the worker in 2010 or $1,000.

Your tax advisor can explain the finer points of the HIRE act and how it might benefit your construction company.